California court upholds Prop 22 victory for Uber, Lyft and DoorDash

A California appeals court on Monday overturned a lower court ruling that found Proposition 22, the ballot measure passed in November 2020 that classified Uber and Lyft drivers as independent contractors rather than employees, was illegal .

The three-judge appeals court decision, first reported by The Wall Street Journal, is a victory for app-based companies that rely on construction workers to transport passengers and deliver meals, but do not pay costs that an employer would pay, such as unemployment insurance. , sick leave and other professional expenses.

In August 2021, Frank Roesch, a Superior Court judge, ruled that Prop 22 was unconstitutional and therefore “unenforceable.” Roesch said Proposition 22 limits the authority of the state legislature and its ability to pass future laws. The companies appealed that ruling, leading to today’s ruling in the California Court of Appeals for the First District.

Reversing this decision not only preserves the independent contractor model in California, but could push the efforts of companies like Uber, DoorDash and Lyft into other states. All three companies saw their shares jump in after-hours trading following the court ruling.

However, the battle over Prop 22 is not over yet. The Service Employees International Union (SEIU), which filed a lawsuit challenging Proposition 22 in early 2021, is expected to appeal the decision to the California Supreme Court. The higher court would have several months to decide whether or not to hear the case, but until then Proposition 22 will remain in effect.

Proposition 22 made it to the 2020 ballot in California after the state sued Uber and Lyft that year, claiming they violated AB-5, the state’s new law that aimed to reclassify drivers as employees. After several legal wrangles, the companies — including DoorDash and Instacart — asked voters in the state to exempt them from the law. They spent $200 million advertising the ballot measure and convincing drivers that Prop 22 would give them more flexibility as well as some benefits. California voters passed the proposal about 59% to 41%.